The operator of the San Francisco-Oakland Bay Bridge and six other spans in the area is selling $750 million in tax-exempt bonds toward a $9 billion program to strengthen the structures against earthquakes.
Delays and cost overruns on the Bay Bridge, California’s busiest, have pushed the price of replacing its quake-damaged eastern stretch to about $6.4 billion from $1.3 billion in 1997.
The bonds being sold by the Bay Area Toll Authority will help finance that project along with seismic retrofitting at the other six state-owned bridges in the area, said an authority spokesman, Randy Rentschler. The authority had about $7.7 billion of muni debt (51387MF:US) rated by Moody’s Investors Service as of April 12, according to the New York-based company.
Bonds maturing April 2053 were offered with a preliminary yield of 5.45 percent, according to three people familiar with the sale who asked not to be identified before prices are final. That’s 1.11 percentage points above an index of benchmark 30-year munis.
The authority collects tolls of as much as $6 per trip to finance maintenance and construction of bridges linking parts of the Bay Area. Rentschler said bonds issued by the authority aren’t earmarked for specific projects, though he said that the Bay Bridge replacement is the last incomplete job.
After bridge planners said July 8 that the span wouldn’t open for traffic as planned in early September, Toll Authority bonds traded at their widest penalty to benchmark munis since 2012. The Oakland-based Metropolitan Transportation Commission attributed the delay in replacing the 2.2-mile (3.5-kilometer) eastern section to failure of 32 seismic anchor rods during testing in March.
Rentschler said news stories detailing challenges with the work have pushed up yield penalties for authority bonds. He maintained that authority debt remains a safe investment because more than 122 million vehicles pay tolls on the bridges each year.
“The Bay Area Toll Authority has an essential monopoly over driving across bridges in the Bay Area,” he said. “The Bay Area’s geography makes it virtually inevitable that you will pay a toll to cross a bridge.”
To contact the reporter on this story: James Nash in Los Angeles at Jnash24@bloomberg.net
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